Business / Corporate

Hitachi may freeze British nuclear project due to swelling costs

Kyodo

Hitachi Ltd. is considering freezing its plan to build nuclear reactors in Wales after facing difficulties in finding investors to finance the project’s ballooning costs, sources close to the matter said Sunday.

If the Japanese conglomerate freezes the ¥3 trillion Wylfa Newydd plant construction, all of the overseas nuclear projects promoted by the government of Prime Minister Shinzo Abe as part of his growth strategy would have faltered.

Mitsubishi Heavy Industries Ltd. is mulling withdrawing from a nuclear project in Turkey amid swelling safety-related costs following the 2011 Fukushima nuclear accident, while Toshiba Corp. has decided to exit from the nuclear plant business outside Japan after incurring huge losses in the United States.

Hitachi has said it wants to lower its stake in Horizon Nuclear Power Ltd., a wholly owned unit it acquired in 2012 from two German electric utilities to take over the nuclear project, to below 50 percent to limit the impact on the Hitachi group of the construction of two advanced boiling water reactors on the Isle of Anglesey in Wales.

Hitachi is likely to have told the British and Japanese governments of its plan to freeze the project, the sources said. The issue will likely be discussed at the planned meeting between Abe and British Prime Minister Theresa May in January, they said.

The company has been contacting prospective investors in the project, including Japanese utilities, but little progress has been made amid concerns that costs will further swell, they said.

Hitachi also remains at odds with the British government over the purchase price of electricity to be generated by the plant, a key factor in determining the project’s profitability for the company and potential investors.

Given the current turmoil in British politics over May’s proposed deal with the European Union on the United Kingdom’s departure from the bloc, price-setting talks are at a “deadlock,” a senior Hitachi official said.

Hitachi Chairman Hiroaki Nakanishi made a personal request to the British prime minister in May this year for direct government investment and other support measures.

Hitachi President Toshiaki Higashihara has said his company will make a decision based on whether the project makes sense financially after all.

The company estimated in July it will incur a loss of ¥270 billion if it decides to pull out of the British nuclear plan.

Hitachi and the British government aimed to start the reactors’ operation by 2025. The total cost of the project has ballooned to ¥3 trillion from the initially estimated ¥2 trillion.